This month Chris Binnington steps away from outside on contract and examine the seemingly simplistic question of whether common law is the law for the common people?
On the face this question reflects a general lack of understanding as to:
- What the common law is, and
- The relationship between contracts and the common law.
As a consequence I now introduce each of our seminars with a brief background to the common law in order to explain this juxtaposition. The common law applies to all of us but there are areas of the common law, which can be excluded or modified in contract. The important thing to remember is that our construction contracts, as indeed with any commercial contract, sits squarely within the framework of the common law. Thus, for example, the common law position on latent defect liability is that it extends forever and a day. Many standard forms of contract, however, modify this position by reducing common law liability to a period deemed to be more suitable for that particular contract. Thus, for example, JBCC restricts latent defect liability to five years and CCC 90 and 2004 to ten years. The common law is, however, not a static concept. It is modified on a regular basis when decisions of our courts take existing principles and change them or perhaps create new principles. In addition, our common law also incorporates statutory enactments, a number of which are of particular importance to the construction industry, for example the Conventional Penalties Act, the Occupation Health and Safety Act and the recent plethora of building regulations, which are more confusing than anything else.
In this article I refer to a case Imprefed (Pty) Ltd v National Transport Com mission 1993 (3) 84 94 (A).which, al though some twelve years old when it came before the Appellate Division, now the Supreme Court of Appeal, has had a substantial impact on the interpretation of certain commonly encountered clauses in civil engineering contracts.
Imprefed contracted NTC to construct 3,5 km of concrete road, part of a major dual carriage freeway. The contract required Imprefed to build the necessary culverts and bridges, carry out cut and fill earthwork operations, prepare the road base and pave the roadway. In terms of the General Conditions of Contract Imprefed were given possession of most of the site and commenced a contract which was scheduled for completion some twenty-eight months later. Ultimately the contract overran by some six and a half months due to a delay in the construction of a bridge and re design of one of the culverts in the road. During the course of construction the engineer issued a site instruction “not to cross” a particular sewer “with any heavy equipment without providing protection” and had later issued another site instruction to “stop all work to the structure” (a brick sewer) “due to changes in design’. Imprefed argued that the instructions caused it to incur extra costs and expense but that only a portion of the liability had been admitted by the NTC. In an action in the High Court Imprefed had been awarded a reduced sum on this claim and they then appealed against the amount of the award and the NTC also appealed against the entire award. Imprefed had relied mainly on Clause 41, the possession of site clause, of the then current Conditions of Contract for Works of Civil Engineering Construction (the contract dated back to 1979). The clause was couched in similar terms to Clause 13(1) of CCC 90 and included the term that:
“If the Contractor suffers delay or incurs expense from failure on the part of the Employer to give possession in the terms of this clause, the Engineer shall grant an extension of time for the completion of the Works and certify such sum as he considers fair to cover the expense incurred, which sum shall be paid by the Employer.”
Imprefed argued that the effect of the site instruction was to deprive it of pos session and it had therefore claimed time and cost compensation under the provisions of Clause 41. NTC argued that, once it had given possession, Clause 41 had no further purpose in the contract since possession could not be taken away from the contractor unless it abandoned the site or the works were brought to completion and takeover by NTC, neither of which situations were applicable.
The court was called upon to interpret the contract using the common law rules of interpretation.
The court upheld the NTC’s argument and confirmed the sole purpose of Clause 41, and this would now also apply to Clause 13 of CCC 90 and Clause 11 of CCC 2004, was to provide a mechanism by which the employer initially gave possession of site to the contractor and that Imprefed approach in claiming under Clause 41 was accordingly wrong. The effect of this was to reverse the lower court’s decision which had awarded Imprefed a reduced amount on its claim, and to uphold NTC’s appeal to dismiss a claim on this basis.
This case also gives useful guidance to a regularly asked question:
Where Conditions of Contract require the contractor to state the provisions of the contract on which he relies in making his claim, will he be barred from making the claim if he either fails to make reference to a clause alternatively cites the wrong clause or clauses? (See for example Clause 48.1.1, 2 of CCC 2004 and Clause 51(1)(a)(ii) of GCC 90.)
Imprefed had relied on Clauses 49 and 50 of the General Conditions of Contract but, at trial and on appeal, it shifted ground and relied on Clause CCC 41. The court referred to the fundamental principle that the object of pleadings (the documentation which formally sets out the contractor’s claims before the court) is to ascertain definitely what is the question at issue between the parties and this object can only be attained when each party states his case with precision. While the court pointed out that the degree of precision obviously depended on the circumstances of each case, more was required when the claims were based upon the provisions of a detailed and complex contract in which numerous clauses conferred the right to additional payment in differing circumstances. Further, the way in which such payments were to be determined may be calculated and claimed in different ways depending on which clause was relied upon. The court pointed out that, particularly in this context, it went without saying that a pleading ought not to be positively misleading by referring explicitly to certain clauses of the contract as identifying the cause of action when another was intended or would at some later stage be relied upon.
No obligation to correct a contractor’s claim.
Whilst one would not expect the degree of precision in a contractor’s claim submitted to an engineer for determination, to be the same as that before a court, engineers when reviewing claims are under no obligation to correct a contractors claim or indeed to create a claim where the contractor has wholly misinterpreted the contractual basis for the claim. Although, as the court pointed out, the facts of particular situations would have to be analysed to determine whether the error was so obvious insofar as which clause should have been referred to in which case it would be inappropriate to dismiss a claim by relying upon the expert’s term of the contract. An example of this might be where a contractor claimed an extension of time that referred to an incorrect clause number. Since there is only one extension of time clause in Conditions of Contract, it would be inappropriate to reject a claim on this basis.
The Rules of Interpretation are as follows:
- Words are to be given their plain, ordinary and popular meaning unless it appears clearly from the contract that both parties intended them to bear a different meaning or the ordinary sense of the words necessarily leads to some absurdity.
- When a contract is capable of more than one meaning, the court will place that construction upon it which upholds it rather than that which makes it illegal and void;
- A clause, which is ambiguous, is interpreted in such a way as to bring it into harmony with the whole of the contract. The contract must, in other words, be construed as a whole;
- Where a later provision in a document qualifies an earlier one, regard it to be had to the qualification in interpreting the document. Thus, written words will take precedence over printed or type written words.
Chris Binnington is the Managing Director of Binnington Copeland & Associates.
THE CIVIL ENGINEERING CONTRACTOR JULY 2005